The following artcile written by Kevin Turner was published on May 4, 2010 in the Jacksonville Times Union.

Jacksonville area bankruptcy filings in March hit the highest level in more than four years, and local bankruptcy attorneys say it could get worse this year before it gets better.

According to U.S. Bankruptcy Court records for the Jacksonville division of the Middle District of Florida — serving Baker, Bradford, Citrus, Clay, Columbia, Duval, Flagler, Hamilton, Marion, Nassau, Putnam, St. Johns, Sumter, Suwannee, Union and Volusia counties — March bankruptcy filings in Jacksonville hit 1,186, ending a downward trend from 953 in September to 701 in January.

In April, filings dropped to 1,009.

Jacksonville foreclosure attorneys predict the spikes since March, not the drops since September, will be more common this year.

“April was the largest single month for bankruptcy filings in our firm since the eve of the bankruptcy law changes in October 2005,” said attorney Chip Parker of Parker & DuFresne , a law firm that handles foreclosures and bankruptcies.

Bankruptcy attorney Eugene Johnson of The Johnson Law Firm said both the decline and a spike in March are cyclical, and overall, bankruptcy filings in Jacksonville are going to go higher before they head down as a long-term trend. That’s due mainly to an increasing number of people forced into bankruptcy after exhausting their unemployment benefits, he said.

“If I had to guess, I would say bankruptcy filings will stay on an upward trend through the end of 2010,” he said. “That depends on unemployment and the home market.”

There were sweeping changes in the bankruptcy law in 2005, making liquidation of personal assets and debts more difficult to qualify for. However, over the last few years, there have been seasonal spikes in unemployment filings and recent highs are beginning to rival pre-2005 levels.

Johnson said it’s common to see more filings in the spring, because people who need to declare bankruptcy usually lack the $1,200 to $3,500 in attorney fees and use their tax returns to pay for it.

“You’re going to see a lot of filings in March, April and May,” he said.

For those who are out of work and have no savings to fall back on, using credit cards to get by creates its own unmanageable debt before long and the need for a fresh start can come at any time, Johnson said. Without a reliable source of income, unemployment can lead to bankruptcy if a person can’t find a job within a year, he said.

Lansing J. Roy, bankruptcy attorney and founder and president of his own law firm, said they receive eight to 14 new bankruptcy filings every day.

“A lot of it is real estate related,” Roy said, “and a lot of it is job-loss related.”

The resultant financial stress can be hard on married couples, he said.

“Some people who come in, I can take a look and say, ‘You want a bankruptcy and a divorce,’ and it’s just a question of what order,” he said.

People file for different types of bankruptcies depending on their financial condition. People unable to pay 25 percent of their credit debt with their disposable income may opt for Chapter 7 bankruptcy, which liquidates certain assets and wipes out debt. People who have too much disposable income to qualify for Chapter 7 can opt for Chapter 13, in which they pay a trustee who pays debts on a plan. People with more than $1 million in home mortgages and rental properties can’t qualify for Chapter 13, so many are opting for Chapter 11, a reorganization plan typically favored by companies that seek bankruptcy but want to stay in business, Johnson said.

Bankruptcies are a lagging indicator of the economy, he said, and won’t begin to wane until other indicators get better.

“Everything I read and see says the trend is going to head upward,” Johnson said. “It’s a convergence of adjustable rates in the housing market, dropping values and rising rates on credit cards.”

Roy, 70, said he had plans to retire, but put them on hold due to his firm’s caseload.

“I’ve never seen anything like this,” he said. “Nothing like it in 40 years. It’s a mess.”

kevin.turner@jacksonville.com,

The following article was featured on First Coast News on March 10, 2010. 

Len Keise - Taren Reed 

JACKSONVILLE, Fla. — If you find yourself living paycheck to paycheck, you aren’t alone. The number of people unable to pay their bills is growing. For some, the only way out they see is bankruptcy. 

In his six years of practice, attorney Eugene Johnson with the Johnson Law Firm has never helped so many clients file for bankruptcy protection.

“This economy has hit just about everyone that I can see,” said Johnson.

Johnson has seen a varying degree of clients, including everyone from those with six-figure incomes to the unemployed.  “We see all folks from all walks of life,” said Johnson, “We have represented doctors, lawyers on down to your average blue collar midnight shift worker.”

Across the United States bankruptcy filings are steadily rising.  “From 2006 to the present, you’ve probably seen a jump of about 100 percent, meaning that in 2006 there was approximately 600,000 bankruptcies filed nationwide. Last year alone, it was about 1.2 million.” The U.S. Bankruptcy Court for the Middle District, which includes Jacksonville, is the third busiest bankruptcy court in the nation.

In 2008, there were 42,557 filings in the district. That jumped to 61,690 filings in 2009, resulting in a 45 percent increase.

“We expect even more this year,” said Johnson.

In Jacksonville specifically, there were 8,412 filings in 2008 compared to 11,144 filings in 2009. That’s an increase of 32 percent.  “If you need to file, you need to file. And the realities are such that most folks only have enough income coming in the door to pay necessary bills and living expenses,” said Johnson.
Johnson only expects more of that same reality and more clients coming through his door as the economy sluggishly rebounds.

“Last month there were 5,000 filings in the Middle District,” said Johnson.

It’s important to note that filing bankruptcy is a life-changing decision that should be made with lots of thought. It affects

Many clients worry about obtaining loans or an extension of credit after bankruptcy.  Most clients are under the impression that Chapter 13 is “better” and that creditors will look more favorably upon them after a bankruptcy if they filed under Chapter 13 instead of Chapter 7.  Many know that Chapter 13 involves repaying at least a portion of total debt through a payment plan.  Truthfully, I doubt whether this factors into a creditor’s decision to extend credit to someone after a bankruptcy.  

Clients also ask which type of filing is “better” for their credit score after bankruptcy. The truth is there are many factors that play into determining a credit score and the exact formula used to determine a credit score is probably only known by a select few (the following website appears to contain some good information on what factors are used to determine your credit score: http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx)

I usually advise clients not to be concerned about the effect of Chapter 7 versus a Chapter 13 on their credit scores. Indeed, a filing under Chapter 7 or Chapter 13 can stay on a credit report up to 10 years from the date of filing. That said, if I had to chose, I would say Chapter 7 is “better.”

Consider this, a typical Chapter 7 proceeding lasts approximately 4-5 months from the date of filing to the date of discharge. Once a Chapter 7 client receives a discharge, he/she can immediately begin to rebuild their credit. Nothing in the Bankruptcy Code prohibits you from immediately applying for credit after a discharge. If new credit is used responsibly, a client’s credit score should improve.

It’s also worth noting that client’s credit reports usually have months and sometimes years of derogatory marks and are filled with negative information. Most of this information is deleted after the client receives a discharge, so their score has nowhere to go but up. A higher credit score after bankruptcy may also be realized by reaffirming certain debts in a Chapter 7. If the debtor reaffirms a debt (continues to pay an otherwise dischargeable debt as previously agreed or on modified terms) such as a vehicle, the creditor will likely continue to report information relating to that debt to the credit bureaus. If paid as agreed, this should serve to improve a credit score.

Now, let’s examine Chapter 13. Chapter 13 payment plans last a minimum of 3 years (unless 100% of the debt can be paid in less time), and up to a maximum of 5 years. Chapter 13 clients are not permitted to incur new debt while making payments under their plan without first obtaining permission from the court. Thus, clients are not able to create new, positive remarks on a credit report or have old, derogatory remarks removed, until they receive a discharge. A Chapter 13 client does not receive a discharge until they successfully complete their plan or the court awards a hardship discharge prior to the completion of the plan (very rare). Thus, Chapter 7 affords the client opportunity to rebuild his/her credit sooner than the Chapter 13 client.

So, if you were to take two individuals, both with the same credit history, put one in a Chapter 7 and the other in a Chapter 13, which one do you think will have a better score after 5 years? Probably, the Chapter 7 client.

On March 4, 2009, the U.S. Department of the Treasury issued a summary of the guideliens for Obama’s Making Homes Affordable. According to the release: “The Home Affordable Refinance program will be available to 4 to 5 million homeowners who have a solid payment history on an existing mortgage owned by Fannie Mae or Freddie Mac. Normally, these borrowers would be unable to refinance because their homes have lost value, pushing their current loan-to-value ratios above 80%. Under the Home Affordable Refinance program, many of them will now be eligible to refinance their loan to take advantage of today’s lower mortgage rates or to refinance an adjustable-rate mortgage into a more stable mortgage, such as a 30-year fixed rate loan.”

Click here to learn more about the program.

Click here to find out if you qualify for the program.

According to an article published in the Congressional Quarterly on February 23, 2009, the Helping Families Save Their Homes Act of 2009 may soon be on the floor of the House or Representatives. It was written that Speaker Nancy Pelosi intends to introduce HR 1106 which, among other things, would allow the bankruptcy court to re-write the terms of a mortgage secured by a debtor’s principal residence. It appears that the new legislation is similar to that of HR 200 and SR 61, but incorporates additional modifications recommended by the House Judiciary Committee. Significantly, HR 1106 still has the “magic language” of HR 200 and SR 61 which allows the bankruptcy court to modify the interest rate and term of a mortgage loan.

The language of HR 1106 can be found here: http://thomas.loc.gov/cgi-bin/query/z?c111:H.R.1106:

In the wake of declining home values and rising foreclosures rates, two proposed bills, H.R. 200 (House of Representatives) and S.61 (Senate), may offer qualifying homeowners some real relief.  The legislation, entitled “Helping Families Save their Homes in Bankruptcy Act of 2009,” would amend key provisions of chapter 13 bankruptcy laws to permit the modification of certain mortgages.

Under current chapter 13 bankruptcy laws, homeowners have the ability to save their principal residence from foreclosure by proposing a plan to cure delinquent mortgage payments.  However, current law prohibits homeowners from proposing a plan that modifies the terms of their first mortgage (subordinate mortgages may be modified under certain circumstances).  In other words, homeowners may not reduce their regular monthly mortgage payments or convert an “adjustable-rate” mortgage to a “fixed-rate” mortgage.  The proposed legislation seeks to change that. 

If passed, eligible debtors may soon be able to propose major changes to their mortgage by reducing the outstanding balance to the fair market value of the home, converting an “adjustable-rate” to a “fixed-rate,” and/or lengthening the re-payment period. 

Monitor the progress of H.R. 200 here:

http://www.govtrack.us/congress/bill.xpd?bill=h111-200

Monitor the progress of S.61 here:

http://www.govtrack.us/congress/bill.xpd?bill=s111-61

It’s no secret that the combination of sky rocketing gas and food prices, high unemployment, and poor consumer confidence, together with the proliferation of adjustable rate mortgages, interest only loans, “pick-a-payment loans”, and tumbling real estate values have caused mortgage foreclosures to climb at an alarming rate. While other parts of Florida have been hit especially hard, Jacksonville and the surrounding areas of Orange Park, Ponte Vedra, Jacksonville Beach, and Atlantic Beach are too being hit hard.

To that end, we are finding that clients are unaware of their options when it comes to dealing with their mortgage company. For this reason, we want to provide prospective clients with a list of options and methods for avoiding foreclosure.  Read the rest of this entry »

According to statistics released on February 19, 2008 by the Bankruptcy Court, Middle District of Florida, bankruptcy filings in the district during the year 2007 were up 70% over the prior year. In turn, the Bankruptcy Court for the Middle District of Florida, which includes Jacksonville, Orlando, and Tampa, became the sixth busiest court in the Nation. There are 90 Federal Districts that report bankruptcy statistics.

Topping the list was the Eastern District of Michigan with 33,799 bankruptcy filings for the 12 months ending September 30, 2007. Rounding out the top six were: Read the rest of this entry »